Most investors know that not every stock they add to their portfolio is going to be a massive winner. But if you diversify wisely, enough of your stocks can outperform to make up for the subpar picks.
The catch? You never really know for sure which positions are going to be which.
This is the dynamic that's vexing most investors eyeing CoreWeave (CRWV 2.21%) as a potential buy right now. The rhetoric regarding its opportunity is riveting, to be sure, but is it rooted in reality? Can this particular company really thrive in its increasingly competitive industry?
In other words, could buying CoreWeave stock today set you up for life? Or would you be better served in the long run by buying something else?
Image source: Getty Images.
What's CoreWeave?
If you're not familiar, CoreWeave operates data centers that offer cloud-based access to artificial intelligence (AI) solutions. In its own words, it controls a "cloud purpose-built for scaling, supporting, and accelerating GenAI [generative AI]," although it offers a wide variety of services ranging from file storage to networking to Kubernetes solutions. Its increasingly important core strength is training AI models, however, and inference learning in particular.
And it's rolling. Its third-quarter revenue rose 133% year over year to just under $1.37 billion, while earnings before interest, taxes, depreciation, and amortization (EBITDA) more than doubled to $838 million, extending trends that have been in place since 2023, when the AI explosion began in earnest.
More of the same is in the cards. Analysts expect CoreWeave's top line to soar from just over $5 billion in 2025 to nearly $29 billion in 2028, pushing the company out of the red and well into the black along the way.
Data source: StockAnalysis.com. Chart by author.
These projections are ultimately rooted in the expected explosion of the global AI infrastructure market, which Precedence Research believes is poised to grow at an annualized pace of 26.6% through 2034... when it would be worth $500 billion. That's obviously bullish.
But is it enough to drive a life-changing gain for shareholders from where CoreWeave stock is priced today? Probably not. That doesn't mean, however, that this ticker can't still produce some significant gains for patient shareholders.
Think about how the real world works
For investors, having realistic and reasonable expectations is crucial. If you expect too much even from a fantastic-performing company, you're apt to sell its shares too soon, undermining your long-term returns. Conversely, if you don't expect enough, you may end up not making some investments that could prove rewarding.
A company like Coca-Cola comes to mind. It's not a high-growth outfit, but when you factor in its share buybacks and the reinvestment of its ever-growing dividend, over the very long term, it has performed much like a growth stock.
In this vein, given CoreWeave's valuation, the market seems to have reasonable, realistic expectations for the data center specialist.
Although it's currently unprofitable, CoreWeave's price-to-sales ratio of 8.8 is in line with similar stocks in the AI arena. And it's also valued at around 36 times 2027's expected earnings, and less than 20 times 2028's projected bottom line of $4.09 per share.
While it might take a few years to grow into its current valuation, CoreWeave is well positioned to capitalize on the foreseeable opportunity. It's a respectable -- even if a high-risk/high-potential-reward -- prospect.
NASDAQ: CRWV
Key Data Points
However, for any shareholders buying it in hopes of life-changing returns, CoreWeave may come up short on the longevity front.
While Precedence Research's longer-term outlook for the artificial intelligence infrastructure industry is admittedly bold, the AI technology support market is increasingly crowded. Iren, Nebius, and Vertiv are just some of the names that have also recently entered the AI data center business, where they joined powerhouses like Microsoft, Alphabet, and Amazon.
So whatever competitive edge CoreWeave enjoys right now, it isn't going to last too long, especially with bigger, deeper-pocketed players vying for the same business. It may be built to do well for a while, but it's not going to do overwhelmingly well enough for long enough to "set you up for life."
Not forever, but for now
CoreWeave isn't a bad stock to own. In the wake of its pullback from its June peak, in fact, it's a particularly good growth stock to buy and hold for the foreseeable future... if you can stomach the volatility and risk.
But, as was the case with personal computers, fracking for oil and natural gas, and 3D printing, the AI infrastructure industry may be generating a level of hype that can't be sustained for the long haul. In the meantime, it's drawing in more competitors than can be fended off. Both factors will work against the above-average long-term gains a company needs to produce for an investment in it to become truly life-changing.
Still, enjoy the ride while it lasts. You might get a few great years out of this stock, and every little bit of portfolio progress helps.
